Austin Ramzy from TIME reports on the stimulus measures that are affecting Chinese auto industry:
While the U.S. has been debating how to bail out GM and Chrysler during the worst auto industry slump in decades, China has been scrambling to come up with its own rescue plan for its ailing carmakers. But unlike Washington, which is providing billions of dollars to prop up the balance sheets of the Detroit giants, China is taking a different route: it’s trying to get consumers to buy more cars through a sales tax break and targeted subsidies for rural buyers.
On Jan. 20, the Beijing government slashed the sales tax on cars with engines of up to 1.6 liters from 10% to 5%. The measure, designed to get Chinese to buy smaller, more fuel-efficient vehicles, has had an immediate impact. January sales of small cars jumped 19% compared with the previous month, according to the China Association of Automobile Manufacturers. Also boosting buyer interest: Lower road taxes and fuel prices, which are set by the government.
[…] The tax cuts are part of China’s efforts to revive its economy, which is suffering from dramatic drops in exports and investment, through a wide range of stimulus measures. In November Beijing announced it will spend $586 billion this year to promote growth. While few details of the stimulus plan have been made public, the government says it will use tax cuts and loans to aid 10 key industries including machinery manufacturing, steel, textiles, oil, shipbuilding and electronics.